The Central Board of Direct Taxes (CBDT) has officially notified the Income Tax Rules, 2026 vide G.S.R. 198(E) on 20 March 2026. These rules come into force on 1 April 2026 and are made under the powers conferred by Section 533 of the Income Tax Act, 2025. With over 225 rules spanning returns, TDS/TCS procedures, perquisites, depreciation, transfer pricing, PAN compliance, and more — this is the foundational procedural framework for India’s new Income Tax Act. Here is a comprehensive, CA-friendly breakdown of every key rule.

📌 Income Tax Rules 2026 : Overview & Commencement

The Income Tax Rules, 2026 are the procedural rules framed under Section 533 of the Income Tax Act, 2025. These rules replace the old Income Tax Rules, 1962 and bring the procedural framework in line with the restructured Income Tax Act, 2025.

📄 ITR Forms & Return Filing — Rule 164

Rule 164 is one of the most consequential rules — it prescribes which ITR form applies to which taxpayer for tax year commencing 1 April 2026. The familiar form names (SAHAJ, SUGAM) are retained.

ITR Form Eligibility — Quick Reference

Who Cannot File ITR-1?

Under Rule 164(3), the following persons are ineligible for ITR-1 (SAHAJ):

• Has assets (including financial interest in any entity) located outside India
• Has signing authority in any account outside India
• Has income from any source outside India
• Is a director in any company
• Has held any unlisted equity share at any time during the tax year
• Total income exceeds ₹50 lakh
• Has agricultural income exceeding ₹5,000
• Has income taxable as cash withdrawal under section 393(3) Sl. No. 5
• Has any deferred TDS payment under section 391(2) or 392(3)

Who Must File Even Without Taxable Income? — Rule 163

Even if income is below the basic exemption limit, the following persons must file a return of income:

• Current account deposits exceeding ₹1 crore in aggregate
• Foreign travel expenditure exceeding ₹2 lakh
• Electricity consumption exceeding ₹1 lakh
• Business turnover / gross receipts exceeding ₹60 lakh
• Gross professional receipts exceeding ₹10 lakh
• TDS + TCS aggregate ₹25,000 or more (₹50,000 for senior citizens aged 60+)
• Savings account deposits of ₹50 lakh or more in aggregate

📊 TDS/TCS Returns — New Forms & Due Dates (Rules 218–219)

TDS Return Forms Under IT Act 2025

Rule 219 prescribes the new quarterly TDS/TCS statement forms under the Income Tax Act, 2025. These replace the old 24Q, 26Q, 27Q forms used under the 1961 Act:

Quarterly TDS Return Due Dates

TDS Payment to Government — Rule 218

The due dates for depositing TDS deducted are as follows:

• Government offices (without challan): Same day as deduction
• Government offices (with challan): Within 7 days from end of month of deduction
• Non-government deductors — March deductions: On or before 30 April
• Non-government deductors — all other months: Within 7 days from end of month of deduction

🏠 Valuation of Perquisites — Rule 15

Rule 15 provides the method for valuing perquisites under the head “Salaries.” The residential accommodation perquisite rates remain familiar:

Residential Accommodation Perquisite — Employer-Owned

⚙️ Depreciation — Rule 25

Rule 25 prescribes depreciation rates for block of assets under Section 33(3). Rates are applied on the Written Down Value (WDV) of each block of assets used during the tax year. The depreciation schedule is contained in Appendix I to the Rules.

📚 Books of Account & Audit — Rules 46–47

Who Must Maintain Books of Account?

Under Rule 46, every person required to maintain books of account under Section 62(1)(b) must keep records that enable the Assessing Officer to compute total income.

Professionals mandatorily covered: Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative, film artist.

Exemption threshold (professionals): Rule 46(3) — books not required if total gross receipts in the profession do not exceed ₹1,50,000 in any one of the three preceding tax years (or in the case of newly set up professions, if receipts are not likely to exceed that amount).

Books to be Maintained

• A cash book or
• A journal (if accounts maintained on mercantile system), plus a ledger

🪪 PAN Rules — Allotment, Quoting & Inoperative PAN (Rules 158–162)

PAN Application — Rule 158

Applications for PAN must be made in Form No. 93, 94, 95, or 96 as applicable. A common application form notified by Central Government may also be used.

Transactions Requiring PAN — Rule 159

PAN must be quoted or applied for in specified high-value transactions, including:

• Cash deposits/withdrawals aggregating ₹20 lakh or more in a year
• Opening of current account or cash credit account
• Purchase/sale of immovable property above prescribed value
• Contracts for sale/purchase of securities exceeding limits

When PAN Becomes Inoperative — Rule 162

If a person who was allotted a PAN failed to link their Aadhaar number under Section 262(6), their PAN becomes inoperative. To reactivate:

• Pay the applicable fee as per Rule 158
• Intimate the Aadhaar number
• PAN becomes operative again after successful intimation and fee payment

💳 Electronic Payment Modes — Rules 48 & 133

Accepted Electronic Payment Modes — Rule 48

For purposes of various deductions and business payment conditions, the following electronic modes are prescribed:

• Credit card
• Debit card
• Net banking
• IMPS (Immediate Payment Service)
• UPI (Unified Payment Interface)
• RTGS (Real Time Gross Settlement)
• NEFT (National Electronic Funds Transfer)
• BHIM (Bharat Interface for Money) Aadhaar Pay
• Tier-III Full KYC Central Bank Digital Currency (CBDC)

Mandatory Digital Payment Facility — Rule 133

Every person carrying on business or profession whose total sales, turnover or gross receipts exceed ₹50 crore during the immediately preceding tax year is required to provide facilities for:

• Debit Card powered by RuPay
• UPI (BHIM-UPI)
• UPI QR Code

This is in addition to any other electronic payment modes already provided.

📈 Capital Gains Rules

Period of Holding — Rule 6

Rule 6 prescribes how the period of holding of capital assets is determined in special situations:

• Shares/debentures acquired on conversion: Period of holding includes the period for which the original bond/debenture/deposit was held before conversion.
• Income Declaration Scheme 2016 assets: Immovable property — from date of registered deed; other assets — from 1 June 2016.
• Assets of foreign company’s Indian branch on conversion to subsidiary: Period includes holding by the foreign branch.

Significant Economic Presence — Rule 13

For purposes of Section 9(9)(d), the thresholds for Significant Economic Presence (SEP) of non-residents in India are:

• Aggregate payments from transactions with persons in India: ₹2 crore in a tax year
• Number of users engaged in systematic/continuous business activities in India: 3,00,000

🔗 Transfer Pricing, Safe Harbour & APA (Rules 77–122)

Arm’s Length Price (ALP) Methods — Rules 77–82

Rules 77–82 prescribe the methods for determining Arm’s Length Price in international transactions and specified domestic transactions. The methods include:

• Comparable Uncontrolled Price (CUP)
• Resale Price Method (RPM)
• Cost Plus Method (CPM)
• Profit Split Method (PSM)
• Transactional Net Margin Method (TNMM)
• Any other method prescribed by CBDT (Rule 78)

Safe Harbour Rules — Rules 86–102

Safe harbour rules reduce litigation by allowing taxpayers to declare certain income at pre-defined margins without TP scrutiny. Key eligible transactions include:

• IT/ITES services to associated enterprises
• Intra-group loans at specified interest rates
• Corporate guarantees
• Contract R&D services
• Core and non-core auto component manufacturing
• Data centre services
• Purchase of milk/milk products (domestic safe harbour)

Advance Pricing Agreements (APA) — Rules 103–122

The APA framework is continued under Rules 103–122. APAs provide certainty on TP for a period of up to 5 years. Key provisions:

• Pre-filing consultation is mandatory (Rule 105)
• Application made in prescribed form (Rule 106)
• Roll-back provision for 4 preceding years available (Rule 111)
• Annual compliance report must be submitted (Rule 113)
• Bilateral and multilateral APAs also governed (Rule 122)

Country-by-Country Reporting (CbCR) — Rules 123–125

Rules 123–125 prescribe maintenance and furnishing of Master File, Local File, and CbCR under Section 511. These apply to constituent entities of international groups meeting the threshold.

🌐 Foreign Tax Credit — Rule 76

Rule 76 prescribes the manner of claiming Foreign Tax Credit (FTC) by resident assesses:

• Credit is available in the tax year in which the corresponding income is offered to tax or assessed in India
• If income is offered across multiple years, FTC is apportioned proportionately
• FTC is available against tax, surcharge and cess — not against interest, fee or penalty
• FTC on disputed foreign tax is not available until the dispute is settled
• Credit cannot exceed Indian tax payable on the foreign income
• Claim must be filed along with return of income

🔄 New Tax Regime — Exercising the Option (Rule 136)

Rule 136 specifies how taxpayers exercise or withdraw their option for the new tax regime. The option is exercised in the return of income (not separately) for each tax year. Categories covered:

• Manufacturing domestic company (Section 199(3))
• Domestic company (Section 200(5))
• New manufacturing domestic company (Section 201(2))
• Individuals, HUF, AOP, BOI, artificial juridical persons (Section 202(4))
• Resident co-operative society (Section 203(5))
• New manufacturing co-operative society (Section 204(2))

🏛️ Non-Profit Organisations — Rules 181–190

Rules 181–190 govern registration and compliance for registered non-profit organisations (NPOs) under the Income Tax Act, 2025:

• Rule 181: Common application for registration (Section 332) or approval for deduction (Section 354). Form 104 (provisional) or Form 105 (regular) to the appropriate Commissioner or CIT(CPC).
• Rule 182: Computation of income from commercial activities under Sections 335(e), 336(e), 337(e).
• Rule 185: Annual statement of financial transactions (Form No. to be prescribed) under Section 342.
• Rule 187: Books of account — NPOs must maintain complete books as specified.
• Rule 188: Audit report under Section 348 to be submitted in prescribed form.
• Rule 190: Certificates to be furnished for donations received.

📌 Income Tax Rules 2026 :Key Takeaways for CAs, Accountants & Taxpayers